Don't be fooled by the sunny skies
In 2005, while in Ojai, we warned ye faithful about real estate risk (before it was widely accepted as a bubble).
In 2006, while in Vail, we shared with Minyans that "the probabilities of a prolonged socioeconomic malaise entirely more depressing than a recession are higher than most folks have factored into their risk assumptions."
In 2007, in The Credit Card, we questioned the credibility of policymakers as they assured us subprime mortgages were contained despite our finance-based derivative-laced global economy.
And last year, we wondered if retail therapy would be necessary immediately before that complex fell 40% and consumers curled up in the corner in a fetal position.
One of the oldest axioms on Wall Street is that you're only as good as your last trade. I've learned that plenty of times throughout my career and I'm reminded of it as I waffle through our current juncture.
As discussed yesterday, I'm fully dressed in my metaphorical fur (100% conviction on the short side) for a pure trade with very defined risk.
My entry levels-stamped on a ticket when I entered the bet-are NASDAQ 2007 and NDX 1630, or exactly where the tech sector closed yesterday. Oddly, it felt like the trade was another case of risk gone awry despite my ripcord remaining firmly overhead.
The beauty of this trade is the relative definition of risk. I wrote yesterday that it was akin to betting a buck to make ten, which I will make every day and twice on Sunday.
If I widen my "stop" a bit-say, 2% above my entry rather than 1%--we could extrapolate odds of 5:1 (risking two dollars to make ten). To each their own as a function of our unique time horizons and risk profiles.
With those vibes in mind and humility in hand, here's what I'm weighing as we edge through towards Turnaround Tuesday:
- I sorta figured we could see some strength as a function of monthly inflows. If that doesn't push the tape through our aforementioned levels by tomorrow, the odds of success on this particular press will increase in kind.
- My biggest concern isn't missing the upside; it's identifying the proper stop for my short-side exposure. I offered yesterday that I typically use 1% for the mainstay indices but I can't help wonder if that crayon is thick enough (it's currently under review).
- Goldman Sachs (GS) and Research in Motion
(RIMM) noticeably lagged yesterday's circle smirk and that warrants a mention as we together edge ahead. You can learn a lot just by watching so I'll be on the lookout for further supply in those names.
- Wal-Mart (WMT), Target (TGT), Hewlett-Packard (HPQ) and Novellus (NVLS) were other red beans in yesterday's Green Sea.
- Has anybody seen a Goldman employee and Jimmy Conway in the same room at the same time?
- Want specific trading ideas, but don't have the time to follow the Buzz all day? Have you tried our FlexFolio by Quint Tatro? He's been trading this market nicely.
- This nugget comes courtesy of Investor's Daily: "Last week the Vickers Weekly Insider Report listed current insider selling at 4.16 to 1. That means more than four times as many shares owned by insiders are being sold than bought. The last time this indicator was this high was the beginning of one of the biggest sell offs in history, October 2007, the top of the 2002-2007 bull market."
- UBS (UBS) reported "earnings" last night and it's CEO offered "it'll take a while" for UBS to be profitable. The stock is trading lower and is on our radar as the reaction to news is always more important than the news itself.
- Should I really be surprised that I'm sitting on a panel today debating the merits of the market as we tickle and touch the most important tech level of the year?
- How would an "in her prime" Julia Child fare on a modern day Iron Chef?
- What happens to the percolating societal acrimony when unemployment benefits run out?
- "The S&P 1000 mark is an important level for the S&P 500. It is notable resistance so it is not surprising that the very positive data was unsuccessful in generating a larger move. This week has the potential to make or break the current market move. A substantial move higher going into the Non Farm Payrolls report may set up a selling opportunity. Alternatively, some base-building prior to a good number may set up a breakout. There are three days and lots of data between now and then. It currently appears as though the S&P 500 is trying to set up a large Head & Shoulders bottom with a very truncated right shoulder and 1006 serving as the neckline. If the breakout materializes, the price objective for the move will be 1346 over the next 12-18 months. For this to happen, volume will need to increase in conjunction with the breakout above the neckline." --Mike O'Rourke, Chief Market Strategist, BTIG
- Please join us in welcoming incoming Minyanville Deputy Editor Megan "Nutmeg" Barnett to our "Award-Winning" staff!
- Good luck Minyans-think positive and remember, profitability begins within.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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